The 32 year-old star filed a claim against News Group Newspapers, owner of The Sun, for defamation of character. An article printed in May, 2005 claimed that Diaz was having an affair with a married man.
Following an investigation The Sun has admitted "any suggestion of a romantic involvement is entirely untrue and without any substance whatsoever".
Cameron Diaz, who has been dating Justin Timberlake since 2003, was awarded a substantial financial settlement, as well as having her legal fees paid by News Group Newspapers.
The star will also be going to court to battle the National Enquirer, which published the same story.
Diaz also recently won a case against a photographer who was attempting to sell topless photos of her.